Amazon 'morphing' free Prime 2-day shipping to 1 day

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Dive Brief:

Amazon is in the process of speeding up its free Prime two-day delivery to free shipping in one day for eligible items for Prime members, Chief Financial Officer Brian T. Olsavsky announced on a conference call with analysts Thursday.

The company is investing $800 million to get that done, which will happen this year. Olsavsky didn't say whether the transition to free one-day Prime shipping would be complete by the holidays.

The change doesn't reflect any move on Amazon's part to shift away from the U.S. Postal Service, UPS, FedEx or other shippers to use its own shipping infrastructure, he said. "We’re going to be using all the levers we’re using now," he said. "We’re definitely going to be needing the continued support of our partners."

Dive Insight:

The shift has already begun in some areas and with many items, with the focus on its North America operations. But it will eventually be a standard Prime offer worldwide on many items the way two-day shipping is now, according to Olsavsky.

"This is all about the core free two-day offer morphing into a free one-day offer," he said.

He also noted that Amazon already offers speedy delivery times including same-day and even within an hour or two in some areas. That likely means the e-commerce giant is ready to up its game at a time when it probably needs to, according to Jon Weber, who leads the retail practice at L.E.K. Consulting. "I’m not surprised by it — they’re already delivering to the consumer in one day and faster — so I think that gives them confidence," he told Retail Dive in an interview. "There was a time when free two-day shipping was a massive difference — that superiority historically, that gap from the competition, removes choice in the mind of the consumer. Well if that’s narrowing — that’s a potential risk to Amazon."

Analysts said that it was time for Amazon to once again differentiate its most appreciated Prime benefit because rivals like Target and Walmart have caught up to some extent. "The last mile race continues to heat up. Other retailers have matched 2-day shipping while others are leveraging store based distribution for click-and-collect or buy-online-pickup-in-store," Danny Silverman, chief marketing officer at Edge by Ascential, told Retail Dive in an email. "The latter offers next or same day delivery options. This is the landscape Amazon competes in so 2-day shipping is beginning to look 'slow.'"

Olsavsky dismissed any notion that Amazon has sweetened its shipping perk because Prime membership growth is slowing, noting that Amazon had more people sign up for the $119 membership in 2018 than any previous year, and that the company is pleased not only with growth but also engagement.

But GlobalData Retail Managing Director Neil Saunders, who called the move "smart" and "necessary," said that there is indeed evidence of increased turnover in Prime memberships. "I also think there is increasing churn in Prime subscriptions as some people opt out as they don’t feel they are getting value for money," he said in an email. "That means Amazon has to beef up the advantages of being in Prime. Better shipping times is one of the ways to do that."